The major U.S. index futures are currently pointing to a significantly lower open on Friday, with stocks likely to give back ground after moving sharply higher over the past several sessions.
Traders may look to cash in on some of the recent strength in the markets amid a negative reaction to earnings news from several big-name financial companies.
Shares of JPMorgan Chase (JPM) are slumping by 2.4 percent in pre-market trading even though the company reported fourth quarter results that beat analyst estimates on both the top and bottom lines.
JPMorgan also announced an increase in reserves for credit losses, as the firm’s macroeconomic outlook now reflects a “mild recession in the central case.”
Financial giants Wells Fargo (WFC) and Bank of America (BAC) are also seeing notable pre-market weakness after reporting their fourth quarter results.
Negative sentiment may also be generated in reaction to a Labor Department report showing an unexpected increase in U.S. import prices in the month of December.
Stocks moved mostly higher over the course of the trading day on Thursday, extending the upward trend seen over the past several sessions. The major averages saw substantial volatility early in the session but climbed firmly into positive territory as the day progressed.
The major averages finished the day off their highs of the session but held on to gains. The Dow advanced 216.96 points or 0.6 percent to 34,189.97, the Nasdaq climbed 69.43 points or 0.6 percent to 11,001.10 and the S&P 500 rose 13.56 points or 0.3 percent to 3,983.17.
With the upward move, the Dow ended the session at its best closing level in over a month, while the Nasdaq and S&P 500 reached one-month closing highs.
The strength that emerged on Wall Street came following the release of highly anticipated consumer price inflation data, which largely came in line with economist estimates.
The Labor Department said its consumer price index edged down by 0.1 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to come in unchanged.
The report also showed the annual rate of consumer price growth slowed to 6.5 percent in December from 7.1 percent in November, in line with expectations. The annual growth was the slowest since October 2021.
Excluding food and energy prices, core consumer prices rose by 0.3 percent in December following a 0.2 percent uptick in November. The increase matched economist estimates.
The annual rate of core price growth slowed to 5.7 percent in December from 6.0 percent in November. The year-over-year growth was also in line with expectations.
The slower price growth eased concerns about the outlook for interest rates, although the Federal Reserve is still widely expected to raise rates by at least 25 basis points at its next meeting.
“Overall, this latest report adds more weight to our view that CPI inflation will fall more rapidly than the Fed expects this year,” said Paul Ashworth, Chief North America Economist at Capital Economics.
“But the Fed isn’t going to stop raising interest rates until it sees accompanying evidence of an easing in labor market conditions and wage growth,” he added. “It will be a couple more months before that evidence is also irrefutable.”
The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended January 7th.
The report said initial jobless claims slipped to 205,000, a decrease of 1,000 from the previous week’s revised level of 206,000.
The dip surprised economists, who had expected jobless claims to rise to 215,000 from the 204,000 originally reported for the previous week.
With the modest decrease, initial jobless claims fell to their lowest level since hitting 190,000 in the week ended September 24th.
Airline stocks showed a substantial move to the upside over the course of the session, with the NYSE Arca Airline Index soaring by 4.1 percent to its best closing level in well over four months.
American Airlines (AAL) helped lead the sector higher, spiking by 9.7 percent after boosting its fourth quarter guidance.
Significant strength was also visible among energy stocks, which benefited from a continued increase by the price of crude oil.
Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index surged by 2.5 percent and 2.1 percent, respectively.
Steel, natural gas and gold stocks also moved notably higher on the day, while considerable weakness was visible among computer hardware stocks.
A steep drop by Logitech (LOGI) weighed on the computer hardware sector, with the software and computer peripherals maker plummeting by 16.9 percent after cutting its sales outlook.
Commodity, Currency Markets
Crude oil futures are inching up $0.15 to $78.54 a barrel after advancing $0.98 to $78.39 a barrel on Thursday. Meanwhile, after jumping $19.90 to $1,898.80 an ounce in the previous session, gold futures are edging up $1.50 to $1,900.30 an ounce.
On the currency front, the U.S. dollar is trading at 128.26 yen versus the 129.25 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0807 compared to yesterday’s $1.0853.
Asian stocks ended mostly higher on Friday, as data showing a slowdown in U.S. inflation helped calm worries over the Federal Reserve’s rate-hike trajectory.
Japanese shares bucked the uptrend as the yen hit a seven-month high and bond yields broke above the Bank of Japan’s target on speculation about a stimulus tweak heading into next week’s policy meeting.
Gold held steady near a seven-month high in Asian trading, while oil prices eased slightly after recent strong gains on optimism surrounding China’s reopening and signs of slowing inflation in the U.S. and Europe.
Chinese shares ended sharply higher after the release of data showing that the country’s trade surplus grew more than expected in December amid easing COVID-restrictions.
The benchmark Shanghai Composite Index rallied 1.0 percent to 3,195.31 as data showed exports and imports fell less than expected for the month.
Hong Kong’s Hang Seng Index jumped 1.0 percent to 21,738.66 after reports China is moving to take “golden shares” in units of Alibaba and Tencent. Shares of the companies ended higher by about 2 percent.
Japan’s Nikkei 225 Index tumbled 1.3 percent to 26,119.52, marking its first losing session in six, on speculation that the BOJ could tweak policy further at a policy meeting next week. The broader Topix ended 0.3 percent lower at 1,903.08.
A surging yen weighed on exporters, with automakers Honda and Toyota falling around 2 percent each.
Uniqlo owner Fast Retailing slumped nearly 8 percent after saying that first quarter earnings declined 2 percent, reflecting weakness at home and continuing COVID-19 restrictions in China.
Convenience store operator Seven & I Holdings jumped 6.1 percent after lifting its full-year earnings outlook.
Seoul stocks rose notably as the Bank of Korea hiked its key interest rate by 25 basis points, as widely expected.
The Kospi advanced 0.9 percent to 2,386.09, rising for the eighth straight session on expectations that the central bank might have reached the end of its hiking cycle.
Australian markets rose for a third straight session as higher commodity prices lifted mining and energy stocks. The benchmark S&P/ASX 200 Index gained 0.7 percent to close at 7,328.10, while the broader All Ordinaries Index settled 0.7 percent higher at 7,540.10.
Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index climbed 0.8 percent to 11,754.44.
Pacific Edge shares jumped almost 6 percent after the cancer diagnostic firm said it had received a signed agreement from Te Whatu Ora Southern for the use of its non-invasive Cxbladder genomic biomarker tests.
European stocks have risen on Friday to hover near a nine-month high, as investors cheer signs of slowing U.S. inflation and better-than-expected trade data from China.
Closer to home, the German economy likely stagnated in the fourth quarter of last year, with GDP rising 1.9 percent over the full-year 2022, official data showed.
Separate data showed the British economy unexpectedly grew in November. GDP grew 0.1 percent in the month as food and drink businesses benefited from the FIFA World Cup.
While the German DAX Index is just above the unchanged line, the French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.4 percent.
Swiss building materials firm Holcim Group was little changed after saying its Swiss team GO CIRCULAR is ready to set sail in The Ocean Race for its first round-the-world regatta.
Italy’s Enel has moved to the upside. The CEO of the Italian power utility was quoted as saying that the company could secure up to 5 billion euros ($5.4 billion) of EU investment funding.
Rational AG, a German manufacturer and retailer of combi steamers and ovens, has also risen. The company reported that its preliminary sales revenues for fiscal 2022 increased 31 percent year-on-year.
United Internet has also jumped. Reuters reported that the company’s web hosting subsidiary Ionos wants to begin the process for an initial public offering (IPO) this month.
On the other hand, online gambling company Kindred Group has shown a substantial move to the downside after a profit warning.
U.S. Economic Reports
While the Labor Department released a report on Friday showing an unexpected increase in U.S. import prices in the month of December, the report also showed a much steeper than expected nosedive in export prices.
The Labor Department said import prices rose by 0.4 percent in December after falling by a revised 0.7 percent in November.
The rebound surprised economists, who had expected import prices to decrease by 0.8 percent compared to the 0.6 percent drop originally reported for the previous month.
Meanwhile, the report said export prices plunged by 2.6 percent in December after declining by a revised 0.4 percent in November.
Economists had expected export prices to decrease by 0.5 percent compared to the 0.3 percent dip originally reported for the previous month.
At 10 am ET, the University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of January. The consumer sentiment index is expected to inch up to 60.5 in January from 59.7 in December.
Philadelphia Federal Reserve President Patrick Harker is due to speak on the Chamber of Commerce for Greater Philadelphia Economic Outlook Survey and participate in a panel of regional business leaders on the economic trends that will impact Greater Philadelphia in 2023 at 10:20 am ET.
Stocks In Focus
Shares of Tesla (TSLA) are moving sharply lower in pre-market trading after Guggenheim downgraded its rating on the electric vehicle maker to Sell from Neutral.
Delta Air Lines (DAL) is also seeing significant pre-market weakness after reporting better than expected fourth quarter results but providing disappointing first quarter profit guidance.
Meanwhile, shares of Virgin Galactic (SPCE) are likely to see initial strength after the space tourism company said commercial spaceline operations remain on track for the second quarter.
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